Fremont City Council approves $238.5 million budget for 2014-15 fiscal year

Fremont City Council voted 4-0 Tuesday to approve a $238.5 million budget that will add back services for residents and staff positions in the 2014-15 fiscal year. The general fund portion of the budget totals $157.6 million.

Three-quarters of the budget is allocated to direct costs for public safety and maintenance, which climbs to 86 percent when overhead costs to support these functions and employees are factored.

The budget, which covers July 1, 2014 to June 30, 2015, reflects a 3 percent increase in spending year over year.

A report given to the council at its meeting Tuesday stated the budget will provide funding to open new Fire Station No. 11 on Lakeview Boulevard in January 2015 and continue Sunday hours at the Fremont Main Library, will direct $1.1 million for affordable housing, as well as provide an additional $1 million contribution to capital projects. It also includes enhanced funding for street maintenance and contributions for the Downtown and Warm Springs/South Fremont projects, three additional police officers and additional prefunding for some of the city's post-employment benefit liabilities.

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The takeaway, according to city staff, is that the improving economy will leave the city in a better position to meet the needs of the residents of Fremont. But more revenue will be tempered by additional spending, as the city backfills positions and tends to street and facilities maintenance deferred during the economic downturn.

Property tax and sales tax are Fremont's most significant revenue sources. Property tax revenues are estimated to total $70.2 million in the 2013-14 year. Staff projects those revenues will increase to $74.2 million in 2014-15, an increase of 5.7 percent.

Sales tax revenues are estimated to total $38.1 million in 2013-14 and grow to $39.4 million in 2014-15, an increase of 3.5 percent, with the largest contributors being the auto sales and business sectors.

Fremont resident Eric Tsai submitted a letter to the council about the proposed budget during the first public hearing in May, stating more funds should be earmarked to pay off unfunded liabilities for retirees.

"As of June 30, 2012 the City of Fremont had an unfunded liability for other post employement benefits of $79.3 million. Since there (are) no assets set aside for this specific liability, the OPEB funded ratio is an alarming 0 percent," Tsai wrote. "Although the city has set aside an additional $1.1 million over the pay-as-you-go expense in this fiscal year and will budget an additional $2.2 million over the pay-as-you-go expense for the fiscal year 2014-2015, this is not sufficient to stop the liability from growing, as the city would need to contribute at least $4 million more than the annual required contribution."

Tsai asked that the city avoid putting this debt on the backs of future generations by increasing the amount the city paid toward this liability now.

The combination of the city's "core" reserves of $23.6 million and the budget uncertainty reserve of $3.7 million results in a total reserve level of $27.3 million, or 17.3 percent of budgeted expenditures and transfers out, according to city staff. This exceeds the 16.7 percent minimum reserve level (two months of revenues or expenditures) recommended by the Government Finance Officers Association. The budget anticipates ending the fiscal year with $600,000 in the fund balance.